An introduction to UK taxes

The UK tax system

The Institute for Fiscal Studies (IFS) publishes good summary descriptions of both the UK tax and benefit system:

• A survey of the UK tax system: Briefing Note BN09, November 2016
• A survey of the UK benefit system: Briefing Note BN13, November 2016

You can find both on the Fiscal Facts section of the IFS website. That section also includes tax and benefit tables, material on public finance, various measures of inequality and poverty, and a summary of tax measures introduced in recent Budgets.

The IFS has also published:

• The changing composition of UK tax revenues – Briefing Note BN182, April 2016 (reviewing the previous 20 years)
• How high are our taxes, and where does the money come from?, November 2019.

HM Treasury used to publish a comprehensive description of the UK’s tax and benefits system in its annual Tax Benefit Reference Manual. The last edition, for 2009-10, is still useful. It is a deposited paper in the Commons Library.

An excellent academic study of the tax system (if now rather dated) is J A Kay & M A King, The British Tax System (5th edition), 1990. Claire Hayes and Ruth Newman, Tolley’s Tax Guide 2019/20 edition, is a useful guide to tax law.

The Budget and the Finance Bill

Each year the Chancellor of the Exchequer presents the Budget, which contains all the tax measures for the year ahead. Traditionally the Budget has been in March, before the start of the tax year on 6 April. The statutory provisions to give effect to these tax measures are set out in a single Bill: the annual Finance Bill.

The Budget and the annual Finance Bill explains how Parliament debates the Budget and scrutinises the Finance Bill, and how the timing of a General Election can affect this procedure.

In recent years Chancellors have made tax announcements twice a year, using the Pre-Budget Report or Autumn Statement as a second fiscal event. In November 2016 Chancellor Philip Hammond announced that from autumn 2017 the Government would present a single autumn Budget. This was meant to allow for more Parliamentary scrutiny of Budget measures ahead of their implementation.

On 29 October 2018 Mr Hammond presented the May Government’s final Budget.

The Budget report and associated documents appear on Gov.uk. Three key sources are:

• the Treasury’s Policy Costings document
• the Treasury’s Impact on Households document
• the series of Tax Information and Impact notes,dealing with each of the tax measures announced, and collated in the Overview of Tax Legislation & Rates.

There are Commons Briefing Papers on the context for the Autumn Budget and a summary of the measures announced. The IFS also published a post-Budget briefing.

The Finance (No.3) Bill 2018-19 was published on 7 November 2018, and the Finance Act 2019 received Royal Assent on 12 February 2019. Parliament has published the Bill and details of its scrutiny. Gov.uk collates explanatory notes for the Bill, and on government amendments made to it during its scrutiny. The Library has also published:

• 2018 Budget & Finance (No.3) Bill 2017-19
• Commons Debate Pack 2017-241.

Tax rates & allowances

Tax rates and allowances for 2018/19 and 2019/20 are in Annex A to HM Treasury, Overview of tax legislation and rates.

Each year the Library publishes a briefing paper summarising rates and allowances for income tax, national insurance contributions, capital gains tax, and inheritance tax.

Basic statistics

HM Revenue & Customs’ Official Statistics pages present data on all taxes. One table, HM Revenue & Customs Receipts, shows the annual receipts from all national taxes. There are also estimates of tax receipts disaggregated between England, Scotland, Wales & Northern Ireland.

There are also details of the cost of basic tax reliefs and illustrative changes to both direct and indirect taxes.

The uktradeinfo site presents statistics on VAT, excise duties and other indirect taxes (although this material is moving to Gov.uk). HMRC also publish a new annual survey of VAT statistics.

Since 2010 the Office for Budget Responsibility (OBR) has provided independent and authoritative analysis of the UK’s public finances. The OBR’s Economic & Fiscal Outlook includes projections for tax receipts over the next five years. (See Table 4.3: current receipts).

In July 2018 the OBR published its Fiscal sustainability report – a longer-term analysis of UK public finances, and in July 2019 its second Fiscal Risks report – a review of risks from the economy and financial system to tax revenues, public spending and the balance sheet.

The OBR also has a historical database of Budget & Autumn Statement policy measures since 1970.

The Library’s Tax statistics: an overview includes recent trends, forecasts and distribution of taxpayers.

Tax advice

HMRC provide detailed guidance for taxpayers, professional advisers agents, including:

• Income Tax
• Tax Credits
• Capital Gains Tax
• Corporation Tax
• Inheritance Tax
• VAT, Advice for Accountants and Advisers
• Appeals against HMRC decisions.

Detailed technical guidance is available in a series of internal manuals.

Contact addresses and helplines and guidance for people with additional needs (such as having a disability or not speaking English) are also available.

Three other very useful sources of tax advice are:

• Low Incomes Tax Reform Group: provides help for pensioners, students, disabled people and carers, migrants, and workers on low incomes. They also publish detailed guidance on making complaints about HMRC and checking one’s tax code.
• TaxAid: a charity providing free tax advice to people who cannot afford to pay a professional adviser. They publish advice for taxpayers, including guidance on tax debt.
• Working with HMRC: a guide for MP and their staff is on the Parliamentary intranet only. It is not available to members of the public.

Disclaimer

The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.